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 / Winter 2004 / Issue 37(originally published by Booz & Company)


Flextronics: Staying Real in a Virtual World

Flextronics’ customers see things differently, however. Extreme Networks, based in Santa Clara, Calif., is a case in point. A medium-sized company with revenue of about $400 million a year, Extreme Networks has a niche selling high-speed, high-intelligence networking switches for corporate networks. The company has refocused its manufacturing strategy to rely on just one EMS company, Flextronics, in two locations (San Jose, Calif., and Guadalajara, Mexico) in place of the three major suppliers in five locations it used previously. The advantages, says Vice President of Operations Diane Pewitt, include greater simplicity, reduced overhead, and the close involvement of the Flextronics team in Extreme Networks’ planning and execution of supply chain strategy.

Flextronics’ vertical integration helps Extreme Networks save money on component costs and avoid delays caused by component shortages. Its production capability in San Jose (close to many U.S. customers and Extreme’s own headquarters) is ideal for customer support and late changes in products, and its Mexican facility provides low-cost volume production.

Most important, the selection of one EMS vendor gives Extreme Networks the opportunity to develop a long-term manufacturing strategy with a partner who has a deep understanding of and interest in the company’s long-term success.

“The most critical element in all this is one that never gets discussed, and that’s the element of trust,” says Ms. Pewitt. “We are working toward a common set of goals. We have a common vision. This business is all about relationships. It’s like building a winning team. It involves trust, getting along, and integrity.”

The Antibureaucrat
Flextronics’ success at building its sprawling global empire is due in no small part to Michael Marks’s creation of an informal, results-oriented corporate culture. He has a passion for the business, a conviction that what Flextronics is doing is different and better than what the competition is doing, and he shares that view enthusiastically and frequently with colleagues at all levels throughout the company.

Gerd Rubeis, director of product design at the Althofen facility, notes that Mr. Marks has visited the plant three times since it was acquired in 1997. “In 24 years that we were part of Philips, we never saw the CEO here once,” says Mr. Rubeis.

Josef Draxler, head of human resources at Althofen, recalls the first time he met Mr. Marks, at the Vienna office. “In most companies, you would expect a CEO to come surrounded with his assistants and his secretaries,” he says. “Michael came in all by himself, pulling his little suitcase on wheels, and just said: ‘Hi guys, I’m here.’”

“I hate bureaucracy,” Mr. Marks declares. He describes his management style in staccato, machine-gun phrases: “I can’t stand large meetings. I answer my own phone. I don’t like lots of rules. The only rule around here is ‘make your own decisions.’” He argues that informality breeds speed, and speed has helped Flextronics in many of its acquisitions. “We’re faster. We’ll meet guys and do a deal in three weeks. Some of the other companies, it takes them that long just to organize a meeting.”

Mr. Marks fosters a flexible, improvisational style. “We’re not fancy people around here,” he says. “Any salesperson can call me anytime. And they do call me, all the time.” Mr. Marks also has an aversion to organization charts. “You’ll never see one in any of my presentations,” he says. “They demotivate people, they put them in boxes. Everybody is part of a team.”

Chief Technology Officer Nick Brathwaite joined Flextronics in 1995 when the company acquired a small startup that specialized in silicon chip design. He wasn’t planning a career in contract manufacturing, a category that traditionally ranked low in the Silicon Valley pecking order, but Mr. Marks’s vision persuaded him to stay. Mr. Brathwaite praises Mr. Marks for growing as a CEO along with the company: “He took a struggling company of $300 million and turned it into a $14 billion multinational in just 10 years. Usually it takes four or five CEOs to take a company through that transition.”

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  1. Lawrence M. Fisher, “From Vertical to Virtual: How Nortel’s Supplier Alliances Extend the Enterprise,” s+b, First Quarter 2001; Click here.
  2. Bill Jackson and Conrad Winkler, “Building the Advantaged Supply Network,” s+b, Fall 2004; Click here.
  3. Tim Laseter, “When Offshoring Isn’t a Sure Thing,” s+b, Fall 2004; Click here.
  4. Jeffrey M. O’Brien, “The Making of the Xbox,” Wired, November 2001
  5. Dave Nelson, Patricia E. Moody, and Jonathan Stegner, The Purchasing Machine: How the Top Ten Companies Use Best Practices to Manage Their Supply Chains (Free Press, 2001)
  6. Richard J. Schonberger, Let’s Fix It! Overcoming the Crisis in Manufacturing: How the World’s Leading Manufacturers Were Seduced by Prosperity and Lost Their Way (Free Press, 2001)
  7. Richard J. Schonberger, World Class Manufacturing: The Lessons of Simplicity Applied (Free Press, 1986)
  8. Richard J. Schonberger, World Class Manufacturing — The Next Decade: Building Power, Strength, and Value (Free Press, 1996)
  9. James P. Womack, Daniel T. Jones, and Daniel Roos, The Machine That Changed the World: The Story of Lean Production (HarperCollins, 1991)
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